State employment growth slows in '07

Reports show 27,600 jobs created in February while unemployment held steady at 4.8%.

California employers are off to a sluggish hiring start this year, failing to maintain their pace of the previous two years amid a slowing economy burdened by struggling housing and manufacturing sectors, according to analysts and state data released Friday.

California employers added 27,600 jobs in February, after a revised loss of 10,400 in January, the state Employment Development Department said. That put the monthly average gain for 2007 at 8,600 jobs, far below the revised average monthly gains of 21,700 in 2006 and 27,200 in 2005.

California's employment engine is humming along in the slow lane, along with the rest of the nation, said Stephen Levy, an economist who heads the Palo Alto-based Center for Continuing Study of the California Economy.

"This is another month of moderate job growth," he said.

But that still "is pretty good news" because it is still growth, he said. That beats slipping into economic reverse -- negative growth and wider unemployment.

California's unemployment rate was stuck at 4.8% in February for the third month in a row and sixth of the last eight.

But for analysts, that kind of steadiness is a sweet spot -- the "full-employment unemployment rate," said Howard Roth, chief economist at the state Department of Finance.

"That is what we think is the lowest the unemployment rate can get in a steady state," Roth said.

"That's about as good as it gets."

It is hard to reduce joblessness further, he said, partly because of "structural unemployment" -- caused by people whose skills don't match what employers are looking for or those who can't get to the jobs they are suited for because of lack of transportation or other reasons.

But will unemployment go higher?

Chapman University economist Esmael Adibi believes it will, in part because the effects of the current sub-prime mortgage meltdown have yet to show up in state employment data.

Adibi also is concerned about the construction sector, which has continued to show job gains despite the slowdown in the housing market. But he believes that commercial construction, which has been holding that sector up, also will slow.

"I expect the unemployment rate will go over 5%" by the end of the year, Adibi said.

Cal State Fullerton economist Adrian Fleissig said he doesn't see much fallout from the sub-prime lending problems because the sector is a "relatively small part" of the economy and labor market.

State economist Roth agreed, saying he didn't expect the problem to spread because sub-prime lenders are typically fairly contained enterprises, requiring little more than an office, telephone and computer.

"Unlike manufacturing, there aren't a lot of suppliers that are going to be hurt," he said.

Roth's outlook is more of the same for the rest of the year. "We'll do all right this year, just probably not as good as last year," he said.

The biggest job gainer in February was information services, which added 7,300 positions, mostly in motion picture and sound recording.

Internet service providers and Web search portals appear to be on the rebound. Such firms employed about 100,000 people seven years ago, before plummeting when the dot-com bubble burst.

In February, their employment was back up to about 35,000, an increase of 7.4% over the last year.